The US industrial property market is forecast to continue its three-plus year-old recovery in 2014, as demand for warehouse and distribution space is sustained by growing international trade and increased industrial production, according to CBRE.
The national industrial vacancy rate is expected to fall to 11.2 percent in 2014 and to 11.1 percent by the end of 2015. The national industrial vacancy rate has fallen to 11.7 percent at the end of the third quarter, after reaching its peak at 14.6 percent in the second quarter of 2010, CBRE reports.
"International trade continues to expand, with exports 10 percent above their pre-recession peak (September 2013)," Jared Sullivan, senior economist, CBRE Econometric Advisors, said in the report. "Industrial production recently hit its pre-recession high, and we expect it will grow further as the U.S. continues to benefit from increased international competitiveness. Inventories remain positive, which will further boost the necessity for industrial space."
The recovery continues to be assisted by a scarcity of new industrial construction, CBRE reports. This year, only 59 million square feet of industrial space is expected to be completely nationally, under the pre-recession average of approximately 150 million square feet annually.
Industrial rent growth is forecast to continue its gain momentum and increase 4.4 percent in 2014 and 4.6 percent in 2015, CBRE reports. This year, rent growth is expected to exceed the rate of inflation for the first time since 2006.
Vacancy will continue to drop as absorption picks up faster than construction, the report says.
"Rents fell substantially during the recession and we are only beginning to see recovery and rent growth, while interest rates and other concerns have kept a relative lid on construction in many markets," Scott Marshall, CBRE's executive managing director of Industrial Services, Americas, said in the report. "We may see spot shortages of space developing in some of the healthiest markets, including Orange County, Los Angeles Metro, Denver and Oakland."